Is Diamond Foods (DMND) Likely to Miss Earnings? - Analyst Blog

Diamond Foods, Inc. DMND, the branded food company is slated to post its second quarter fiscal 2014 results on Mar 11, 2014. In the previous quarter, the company delivered a positive earnings surprise of 28.6%. Let's see how things are shaping up for this announcement.

Factors this Past Quarter

Although Diamond Foods reported better-than-expected bottom-line results, its sales for first-quarter fiscal 2014 were disappointing mainly due to weak performance at the company's Nuts segment, partially offset by improved sales at the Snacks segment. The company's gross margin expanded 200 basis points (bps) to 24.7%, resulting from better price realization, effective cost management and enhanced productivity at the company's operating segments. On one hand, the company is trying to reinstate itself on the growth trajectory, but on the other hand it remains susceptible to the near-term headwinds such as challenges related to procuring walnut supplies and mending ties with growers.

Earnings Whispers?

Our proven model does not conclusively show that Diamond Foods is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks ESP: Diamond Foods currently has an Earnings ESP of 0.00%. This is because the Most Accurate estimate is in line with the Zacks Consensus Estimate of 8 cents per share.

Zacks Rank #2 (Buy): Diamond Foods' Zacks Rank #2 (Buy) when combined with 0.00% ESP makes surprise prediction difficult. We caution against stocks with a Zacks Rank #4 and 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

TD Ameritrade Holding Corporation AMTD, Earnings ESP of +6.25% and a Zacks Rank #1 (Strong Buy).

CommScope Holding Company, Inc. COMM, Earnings ESP of +5.71% and a Zacks Rank #1 (Strong Buy).

First Merchants Corporation FRME, Earnings ESP of +2.56% and a Zacks Rank #1 (Strong Buy).